United States District Court, D. Arizona
A. Teilborg Senior United States District Judge
before the Court is Plaintiff Michael Russo’s motion
for default judgment against Defendants Pelican Partners
International S. de R.L. de C.V. (“Pelican
International”), and Pelican Partners International,
LLC (“Pelican Partners”), pursuant to
Fed.R.Civ.P. 55(b). (Doc. 11). No response has been filed by
Defendants. The Court will grant the motion.
action commenced on October 6, 2015, when Plaintiff’s
Complaint was filed. (Doc. 1). The Defendants named in this
action failed to answer the Complaint or file any motion to
dismiss in accordance with Federal and Local Rules. On
November 25, 2015, upon application, the Clerk of the Court
entered default against Pelican International and Pelican
Partners pursuant to Rule 55(a). (Doc. 10). Plaintiff
thereafter filed the pending motion for default judgment.
February 25, 2016, this Court Ordered Plaintiff to show cause
why Defendants Jonathan Beck and Alessandra Beck should not
be dismissed from the action for failure to serve in
accordance with Fed.R.Civ.P. 4(m). (Doc. 14). Following the
March 1 hearing, the Becks were dismissed. (Doc. 15).
Plaintiff subsequently filed a Motion for Entry of Judgment
pursuant to Fed.R.Civ.P. 54(b),  (Doc. 16), and renewed his
motion for default judgment. (Doc. 17 at 2). Since the
default was entered on November 25, 2015, neither Pelican
International nor Pelican Partners have responded in any
entry of default, the factual allegations of the Complaint,
except those relating to the amount of damages, are taken as
true. Yoo v. Arnold, 615 Fed.Appx. 868, 870 (9th
Cir. 2015); Fair Housing of Marin. v. Combs, 285
F.3d 899, 906 (9th Cir. 2002); Televideo Systems,
Inc. v. Heidenthal, 826 F.2d 915, 917 (9th Cir.
1987). The Court thus accepts as true the well-pleaded facts
contained in the Complaint. (Doc. 1).
Civ. P. 55(a) establishes that “[w]hen a party against
whom a judgment for affirmative relief is sought has failed
to plead or otherwise defend as provided by these rules . . .
the clerk shall enter the party’s default.” Once
a default has been entered, and a defendant fails to appear
to move to set aside the default, then the Court may enter a
default judgment pursuant to Fed.R.Civ.P. 55(b)(2). The
“general rule” with respect to default judgments
is that they “are ordinarily disfavored, ” as
“[c]ases should be decided upon their merits whenever
reasonably possible.” Eitel v. McCool, 782
F.2d 1470, 1472 (9th Cir. 1986) (citing Pena v. Sequros
La Comercial, S.A., 770 F.2d 811, 814 (9th Cir.
1985)). Nonetheless, “[g]ranting default judgment is
within the court’s discretion.” EEOC v.
Recession Proof United States LLC, No.
11-CV-01355-PHX-BSB, 2013 U.S. Dist. LEXIS 171524, at *8 (D.
Ariz. Aug. 19, 2013).
moves the Court to exercise its discretion and enter default
judgment against Defendants Pelican International and Pelican
Partners for each of the Complaint’s claims. In
determining whether default judgment is appropriate, the
Court is guided by consideration of the following factors:
“(1) the possibility of prejudice to the plaintiff, (2)
the merits of plaintiff’s substantive claim, (3) the
sufficiency of the complaint, (4) the sum of money at stake
in the action; (5) the possibility of a dispute concerning
material facts; (6) whether the default was due to excusable
neglect, and (7) the strong policy underlying the Federal
Rules of Civil Procedure favoring decisions on the
merits.” Eitel, 782 F.2d at 1471-72 (citation
omitted). The Court will address each of the applicable
factors in turn.
Possible Prejudice to Plaintiff
first Eitel factor weighs in favor of granting
Plaintiff’s motion, as Plaintiff will be prejudiced if
default judgment is not entered in its favor. As noted
supra, at no point have Defendants responded to this
action, and the record reflects that Plaintiff gave proper
notice. (Docs. 6, 7). If the motion for default judgment is
not granted, Plaintiff “will likely be without other
recourse for recovery.” PepsiCo, Inc. v.
Cal. Sec. Cans., 238 F.Supp.2d 1172, 1177 (C.D. Cal.
2002); see also United States v. $86, 496.00 in
United States Currency, No. CV-07-1693-PHX-DGC, 2008
U.S. Dist. LEXIS 115052, at *4-5 (D. Ariz. July 1, 2008)
Merits of Plaintiff’s Claims
as here, a default has been entered, the factual allegations
of the Complaint are taken as true. However, for this factor
to weigh in favor of granting a motion for default judgment,
a plaintiff must plead sufficient facts to “state a
claim on which it may recover, which often requires
establishing a prima facie case.” Getty Images
(US), Inc. v. Virtual Clinics, No. C13-0626JLR,
2014 U.S. Dist. LEXIS 12449, at *8-9 (W.D. Wash. Jan. 31,
2014) (citing Danning v. Lavine, 572 F.2d 1386, 1388
(9th Cir. 1978)); see also Cripps v. Life Ins.
Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992).
Thus, the Court must analyze each of Plaintiff’s four
distinct claims against Defendants: (1) breach of contract;
(2) breach of the covenant of good faith and fair dealing;
(3) negligent misrepresentation by omission; and (4)
negligence per se.
Breach of Contract
Complaint first alleges that Defendants breached a written
contract between themselves and Plaintiff. The Court notes at
the outset that Plaintiff failed to attach to the Complaint
any of the documents relied upon in support of his claim,
which is perplexing. Nonetheless, upon entry of default, the
factual allegations of the Complaint, excepting damages, are
taken as true. Yoo, 615 Fed.Appx. at 870. Having
reviewed the Complaint, the Court finds that Plaintiff has
made out a prima facie claim.
breach of contract clam requires proof of the existence of a
contract, breach, and resulting damages. Thomas v.
Montelucia Villas, LLC, 302 P.3d 617, 621
(Ariz. 2013). Here, the Complaint alleges that on September
29, 2002, Plaintiff “executed a purchase and sale
agreement” with Defendants “to purchase a
condominium unit at Bella Sirena” in Mexico. (Doc. 1 at
3). The facts further allege that on May 8, 2004, the parties
executed a “Promise of Trust” which obligated
Defendants to transfer ownership of the property and title to
the unit through an “irrevocable transfer of ownership
trust, known as a fideicomiso in Mexico.”
(Id. at 4). During the intervening months, Plaintiff
tendered a down payment on the unit, and made several
installment payments, totaling $233, 910 towards the purchase
of the condominium, completing Plaintiff’s obligations
under the agreement. The Promise of Trust further committed
Defendants “to warrant and defend [Plaintiff’s]
clear title to the unit.” Defendants have failed to
deliver clean title to Plaintiff, and have failed to defend
Plaintiff’s title. A construction dispute arose in
2006-which Plaintiff was never made aware of-and in 2014,
Plaintiff learned from the condominium’s Homeowners
Association that the resolution of the “construction
dispute” resulted in a judgment that stripped Plaintiff
of ownership of the property. (Id. at 5-6). At no
point was Plaintiff given title to the property, at no point
did Defendants inform Plaintiff of legal proceeding that
could affect his status as owner, and at no point did
Defendants endeavor to defend Plaintiff’s title.
on the preceding facts, taken as true, Plaintiff has made out
a prima facie case that he entered into a written agreement
with Defendants, carried out his contractual obligations, and
that Defendants failed to carry out their own obligations
when they failed to deliver title to the unit to Plaintiff.
It follows that Defendants have breached, and Plaintiff has
suffered $233, 910 in damages, the amount tendered to
Defendants for delivery of clean title to the at-issue
Breach of the Covenant of Good Faith and Fair
recognizes the covenant of good faith and fair dealing, an
implied covenant present in all contracts, as a matter of
law. See United Dairymen of Ariz v. Shugg, 128 P.3d
756, 760 (Ariz.Ct.App. 2006) (recognizing that “[a]ll
contracts as a matter of law include the implied duties of
good faith and fair dealing, and contract damages are
available for their breach”). “A party can breach
the implied covenant of good faith and fair dealing without
breaching an express provision of the underlying
contract.” Id. (citing Beaudry v. Ins. Co.
of the West, 50 P.3d 836, 841 (Ariz.Ct.App. 2002)).
Breach of this implied covenant may occur where a party acts
“in ways not expressly included in the contract but
which nonetheless bear adversely on the other party’s
reasonably expected benefits of the bargain.”
Id. (citing Bike Fashion Corp. v. Kramer,
46 P.3d 431, 435 (Ariz.Ct.App. 2002)). Stated another way,
“[t]he implied covenant of good faith and fair dealing
prohibits a party from doing anything to prevent the other
contracting parties from receiving the benefits of the
agreement.” Enyart v. Transamerica Ins. Co.,
985 P.2d 556, 561 (Ariz.Ct.App. 1998).
Complaint alleged two instances of Defendants’ behavior
that constitute breach the implied covenant of good faith and
fair dealing: (1) Defendants failed to timely deliver clean
title of the condominium property to Plaintiff; and (2)
Defendants failed to “mount a defense in litigation in
Mexico against [Plaintiff’s] equitable title to the
subject property.” (Doc. 1 at 8). Plaintiff has also
asserted that these identical failures by Defendants
constitute breach of contract’s express terms.
(Id.). Although a party need not violate the express
terms of a contract to breach the implied covenant of good
faith and fair dealing, ” Wells Fargo Bank v. Ariz.
Laborers, Teamsters & Cement Masons Local No.
395 Pension Trust Fund, 38 P.3d 12, 29 (Ariz. 2002)
(citation omitted), these actions are plainly consistent with
acting in a way to prevent the other party from
“receiving the benefits of the agreement.”
Enyart, 985 P.2d at 561. The Complaint alleges that
Defendants accepted payment of $233, 910.00 from Plaintiff
over a period of two years, frequently reassured Plaintiff
that they were endeavoring to fulfill their contractual
obligations, failed to deliver clean title to the property,
failed to ever notify Plaintiff of any ongoing litigation in
Mexico concerning the property, and failed to mount a good
faith defense on Plaintiff’s behalf. Plaintiff has
pleaded a prima facie claim that Defendants breached the
implied covenant of good faith and fair dealing.
has presented no evidence to indicate that the contract
between himself and Defendants allowed for the recovery of
liquidated damages. Accordingly, ordinary contract damages
are the “proper measure of damages for this
breach.” U ...